CMS Clarifies Oxygen Equipment Replacement

The Centers for Medicare & Medicaid Services (CMS) recently updated Pub. 100-04, Medicare Claims Processing Manual, chapter 20, to clarify that when a durable medical equipment, prosthesis, orthotics and supplies (DMEPOS) supplier files for bankruptcy and cannot continue to furnish oxygen to its Medicare beneficiaries, the oxygen equipment is considered lost and payment may be made for replacement equipment as deemed necessary.
Medicare already reimburses suppliers for the replacement of oxygen equipment if it has been in continuous use by the patient for the equipment’s reasonable lifetime or has been lost, stolen, or irreparably damaged. This expanded definition of the term “lost” is effective Oct. 1.
In the event a supplier files for Chapter 7 or 11 bankruptcy under Title 11 of the United States Code, Medicare will cover the cost of replacing the oxygen equipment and a new reasonable useful period and 36-month rental payment period will begin.
To receive payment for the replacement of oxygen equipment, supporting documentation is a must. Suppliers should include the following information with claims:

• The most recent test date and blood gas testing result,
• Oxygen Certificate of Medical Necessity (CMN),
• The HCPCS Level II code for the new oxygen equipment (stationary oxygen equipment – E0424, E0439, E1390, E1391, E1405, or E1406 or portable oxygen equipment – E0431, E0433, E0434, E1392, or K0738),
• The HCPCS Level II modifier RA Replacement of a DME Item, and
• A narrative describing why the equipment was replaced. Note: Proof-of-delivery documentation from the previous supplier is not required.

For the replacement of oxygen equipment due to bankruptcy, suppliers also should include the following supporting documentation with claims:

• For a Chapter 7 bankruptcy, include court records documenting that the previous supplier filed a petition for a Chapter 7 bankruptcy in a United States Bankruptcy Court.
• For a Chapter 11 bankruptcy, include court records documenting that the previous supplier filed a petition for a Chapter 11 bankruptcy in a United States Bankruptcy Court, and documents filed in the bankruptcy case confirming that the equipment was sold or is scheduled to be sold as evidenced by one of the following:
  • The court order authorizing and/or approving the sale; or
  • Supporting documentation that the sale is scheduled to occur or has occurred (e.g., a bill of sale, or an asset purchase agreement signed by the seller and the buyer); or
  • A court order authorizing abandonment of the equipment.

Caution: If the original supplier divests business and equipment outside of the court bankruptcy process and it is detected, Medicare will not pay the replacement equipment claim.
MLN Matters MM6838 notifies physicians of this policy change. The official instruction (CR 6838) issued to your Medicare contractor regarding this change also is available on the CMS website.

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